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Troublesome conversion rate

06 November 2023

IMRG asks can improvements in the delivery and return proposition give retailers a boost?

ON-SITE conversion (meaning the percentage of visitors who complete a purchase) has been on a steady decline since the Covid-19 pandemic boom which saw many online retailers reaping the benefits of a national lockdown. Now that in-store retail has made a strong return, and with other external factors such as the cost-of-living crisis at play, the industry average overall conversion rate has decreased from the 4% mark – with variation by category – in the pandemic years to around 3% in 2023 (IMRG’s Online Sales Index).

The consequences of inflation are evident in the data which shows that premium retailers have seen a steep decline in conversion in comparison to budget and mid-market retailers. When you compare this data against average basket values, premium and mid-market retailers have experienced a higher level of growth for this metric than budget retailers. This suggests that items have got more expensive, but it could also imply that customers are opting for top-performing, more luxury items for the sake of longevity rather than cheaper items that may need to be replaced sooner. Therefore, customers may be buying less overall, but when they do, we might expect it’s for higher quality.

Customers may also be looking at the value proposition of items they wish to purchase. For example, some of our retail members have seen that their customers are opting for the bigger bottle of perfume or cream because while it may be more expensive, it has more monetary value than the cheaper alternative in the long run. With this reasoning, it would make sense that customers will not have to purchase as frequently as they might have before.

With declines in conversion rates, plenty of retailers are struggling to achieve Year-on-Year growth across other metrics. For 27 consecutive months, from May 2021 to August 2023, industry average YoY revenue growth was negative. The surprising +1.2% YoY reported in August likely owed to retailers putting all their efforts in achieving growth to form solid ground for the peak season in Q4. Also, numerous retailers began their ‘preparing for Christmas’ campaigns at this time to help cost-conscious customers spread the cost of the busy period ahead.

How the delivery proposition can help

A new IMRG survey shows that a significant 34% of 1,000 customers have not completed a purchase owing to delivery concerns. To put this into perspective, a retailer that has one million customers on their site who intend to purchase will likely loose 337,000 of those customers to a delivery issue.

The two major reasons given for this are fear of failed delivery due to no one being home, and the additional cost of home delivery. Therefore, to boost conversion rates, retailers might consider their delivery proposition more closely to reflect this. For example, with the availability of locker boxes and third-party collection services, retailers can utilise these to their best effect, providing customers with more choice. Another option is offering timeslot delivery so that customers can pick a time that suits them best, mitigating the amount of failed deliveries that cost the retailer and reduce customer satisfaction. It is worth noting that most customers believe an acceptable timeslot is between 1-2 hours.

43% of customers have abandoned an online purchase at checkout because of delivery issues. One option might be for retailers to provide free delivery at a threshold and include a bar at the checkout to show whether customers have secured this based on what is in their basket, and how much they have left to spend to get this benefit. This may help improve average basket values and fulfil the on-going desire for free delivery. 

Further IMRG research revealed that 63% expect more sustainable delivery options in 2023. However, as we have noted, the desire for free delivery means that 41% will not pay for this service, though 50% will pay for this often, or at least sometimes. Retailers can improve their conversion rates by creating a delivery proposition that reflects the interests and morality of their customers. If changing their proposition is not feasible in the short term, retailers can promote more sustainable services that they may already have, such as click and collect, and experiment with using green indicators next to this option at checkout.

What about returns?

Often retailers foreground the customer experience pre-purchase in hopes to see increases in their conversion rates and forget that the post-purchase experience can also help prompt growth. This means looking at things beyond the checkout and delivery and returns information pages. 

Once a customer has completed a purchase, recent IMRG data has shown that more than half of customers want personalised offers in their tracking/shipping updates. This method may trigger the customer to shop with the retailer again after, or even before, they receive the item they have purchased. The most favoured offers include discount codes and free delivery on their next purchase. The latter offer is clever because if we know that the cost of home delivery is a key concern for customers, removing that barrier to purchase as a reward for converting can grow loyalty, and subsequently create positive chain of effect for various performance metrics.

A similar approach can be taken for online returns. In communication concerning the progress of a return, retailers can provide these same offers to inspire customers to give them another chance. Perhaps adding free returns to this mix will help these customers feel that they can shop without the anxiety of possibly ending up out of pocket. 

Over half of retailers in 2022 marked returns as a high or very high issue to tackle for their business, so making the returns process as easy and as useful as possible for the customer is a way to get them to convert again.

Considering this further, retailers can try to limit the number of unsatisfied customers and reduce returns by doing quality checks on their items, and by doing comprehensive analysis on the returns that they do get to understand why customers don’t want to keep the item. By providing top range products that meet expectations more so than not, retailers will grow their positive reviews and subsequently boost conversion rates. After all, a significant element of what makes a customer convert is trust in the retailer.

The peak period is approaching, which means a flurry of returns by the new year when Christmas presents are not wanted or do not fit, or when customers start returning items out of buyer’s remorse after participating in the Black Friday rush – perhaps buying items that they don’t need. Therefore, to boost healthy conversion (conversion that does not result in returns), retailers can promote exchanges or personalise their Black Friday offers to a certain customer tier, giving their ideal customers deeper benefits than those with a negative track record. 

Yet, with an influx of returns, this also provides the chance to reengage all these customers with follow-up benefits as mentioned previously, enabling retailers to inspire repeat purchases and loyalty from what might have been one-time buyers, perhaps even from those who were the most unsatisfied.